Rainy forecast pressures grain

Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach him at 800-450-1404.

Wheat struggles

Wheat struggled last week as it has become harder to find bullish news to feed the bulls. For the week ending Aug. 2, September Minneapolis was off 45.5 cents, September Chicago dropped 33 cents, and September Kansas City dropped 35 cents. For the month of July, September Minneapolis wheat gained $1.09, September Chicago gained $1.31, and September Kansas City improved $1.36.

Wheat started the week with strong gains. Early support spilled over from a stronger corn and soybean complex. Wheat does not have any friendly fundamental news of its own as harvest activity is reaching one-third complete. So far, yields have been coming in better than expected and that has limited session gains, but that is being overshadowed by the bullishness of the drought stricken corn and soybeans. Wheat is trying to hold a premium to corn to stay out of the feed ration, but at this point, it looks like the only way to cut wheat stocks is to increase feed demand.

The July 31 session brought selling to the wheat exchanges from both commercial and noncommercial traders. The market opened the session slightly weaker, but saw sharp losses develop as corn slipped lower. Long liquidation was tied to a large net-long futures position held by traders. Profit taking added to the negativity.

The Aug. 1 and 2 session was pretty much the same as July 31; sell-off from spill over selling from the corn and soybean complex. The only supporting factor for wheat is production issues in the Black Sea region as well as in Russia. Corn has been the major influencer to wheat over the past few months and that has helped wheat trade to levels not seen since 2008. The Aug. 2 session also saw pressure from news that the European Union Central Bank is not coming to help support its fragile economy. On that same note, the U.S. Federal Reserve has not made any progress on any sort of U.S. stimulus to help the stagnant U.S. economy. The weaker economies have traders worried about world demand for wheat.

Corn: new all-time highs

The September corn contract lost 5 cents from the previous week, while December was up 2 cents as of the Aug. 2 close. Buying interest has slowed as corn traded to new all time high last week. Demand has also slowed at these price levels. Traders are also looking ahead to the Aug. 10 U.S. Department of Agriculture monthly supply and demand report.

December corn made a new all-time high on July 29 and continued to trade with strength July 30. Disappointing weekend rains and a hot and dry forecast for the next two weeks created buying interest. Traders were also expecting another drop in the July 30 crop condition rating. The report showed a 2 percent drop in good to excellent, now down to 24 percent. The poor to very poor ratings increased 3 percent, now at 48 percent, with Missouri at 83 percent, Illinois at 71 percent, Indiana at 69 percent, Iowa at 46 percent, South Dakota at 41 percent and Nebraska at 37 percent. Declining yield estimates continue to surface and that adds additional support. The market took back the 21- cent gains from July 30 on July 31 and Aug. 1. End of the month profit taking pressured the corn trade on July 31. Buying interest also has slowed with talk of changes to the ethanol mandate and a slowdown in export sales. Livestock producers are requesting a waiver to the ethanol mandate from the U.S. Environmental Protection Agency. This did happen in 2008. There is also talk that nothing may happen until after the November election. International demand has also shifted to Black Sea and Brazilian corn. Brazil’s corn is currently $36 per metric ton cheaper than the U.S.’s

On Aug. 2, corn continued to trade with weakness as December closed at less than $8 for the first time last week. Support came from an export sales report that was near the high end of the trade’s estimates. As of July 26, cumulative corn sales stand at 96.7 percent of the USDA forecast for 2011 to 2012 marketing year versus a five-year average of 100.2 percent. Sales of 251,000 metric tons are needed each week to reach the USDA forecast. A private firm also released its yield estimate of 124.3 bushels per acre and harvested acre estimates continue to get smaller. The market struggled into the close and ended with small losses. Buying interest has slowed as we trade near contract highs and is also limited with the demand destruction that we have seen with $8 corn.

Ethanol production for the week ending July 27 averaged 809,000 barrels per day, which is up 1.63 percent versus the previous week and down 7.86 percent versus last year. Total ethanol production for the week was 5.663 million barrels and was the first week of production increases for the month of July. Corn used in production was estimated at 86.18 million bushels versus 84.791 million bushels for the previous week. This crop year’s cumulative corn used for ethanol production is 4.52 billion bushels. Corn use needs to average 108.364 million bushels per week to meet this crop year’s USDA estimate of 5.05 billion bushels.

Crop conditions had 24 percent of the crop rated as good to excellent, 28 percent fair and 48 percent poor to very poor. Corn silking was at 94 percent, compared with 78 percent one year ago and the five-year average of 77 percent. Corn in the dough stage was 37 percent, compared with 15 percent one year ago and a five-year average of 17 percent. Corn that is dented was 13 percent, compared with 3 percent one year ago and a five-year average of 3 percent.

Soybeans: volatile trade, small gains

For the week ending Aug. 2, November soybeans were up 14.75 cents. For the month of July, November soybeans gained $2.13. Long-term fundamentals remain bullish for the soybean market as global stocks tighten. Weather remains the main force in the market.

Soybeans opened the week sharply higher and closed near session highs. The gains of more than 40 cents were enough to recover about half of the previous week’s losses. Commercial and noncommercial traders were buying in light of the still-concerning forecast. There was some rain over the weekend — July 28 and 29 — but much more is needed if yields are to be prevented from falling further. Traders expected crop conditions to fall another 1 to 2 percent, and the report showed a 2 percent decrease. Export demand remains strong, as the export inspections estimate came in above the amount needed to keep pace with USDA’s projection.

The July 31 session had soybean trading both sides of unchanged before closing with small losses. Support continues to come from the weather forecast. Expected poor U.S. yields combined with the poor crop out of South America and continued strong demand to ensure that global stocks will remain extremely tight.

Selling took center stage the rest of the week as soybeans were sharply higher overnight but turned around to trade sharply lower at midday on Aug. 1 and 2. Trade remained volatile as the market followed the weather. The next two weeks will be critical for the soybean crop, and the forecast does not appear to be changing much. On Aug. 2, noncommercial traders continued to exit their near-record long futures position ahead of the weekend. The market remains bullish longer-term as yields are likely to fall below USDA’s 40.5 bushel-per-acre estimate. The export sales report was somewhat bullish.

Barley

USDA reported no barley export inspections for the week ending July 27. There was no barley export sales reported for the week ending July 27.

Cash barley bids in Minneapolis slipped lower last week, putting feed barley at $5.55 per bushel, while malting barley bids were at $6.85.

Durum

USDA estimated durum export shipments pace for the week ending July 29 at 780,000 bushels, with all of the bushels going to Italy. Durum export sales pace for the week ending July 27 was estimated at 400,000 bushels.

Cash bids for milling quality durum on Aug. 2 were at $7.75 per bushel in Berthold, N.D., while Dickinson, N.D.’s bids were at $8.10.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Aug. 2 with $5.30 (Canadian) gains. The canola market was supported early last week by thoughts of improving demand outlook as buyers switch away from high priced soybeans and into alternative products such as canola. Late week pressure spilled over from a lower U.S. soybean complex, as well as from profit taking.

Cash canola bids in Velva, N.D., on Aug. 2 were at $26.42 per hundredweight.

Dry beans

Dry bean conditions declined for the most part last week with all states except one seeing declining ratings. For the week ending July 29, these states were reporting dry bean conditions: North Dakota: 50 percent good to excellent, 37 percent fair, 13 percent poor to very poor, a decrease of 2 percent from the previous week; Minnesota: 65 percent good to excellent, 27 percent fair, 8 percent poor to very poor, an increase of 1 percent from the previous week; Nebraska: 47 percent good to excellent, 44 percent fair, 9 percent poor to very poor, a decrease of 1 percent; and Michigan: 42 percent good to excellent, 34 percent fair, 22 percent poor to very poor, a decrease of 5 percent from the previous week.

Sunflowers

As of July 29, North Dakota’s sunflower crop was 51 percent in bloom, compared with 20 percent for the previous week and 15 percent for the five-year average. North Dakota’s sunflower crop condition report estimated the crop at 71 percent good to excellent, 27 percent fair and 2 percent poor, an increase of 2 percent.

Cash sunflower bids in Fargo, N.D., on Aug. 2 were at $23.90 per hundredweight.